LSI Forces Out Adaptec

Storage chip manufacturer LSI Logic Corp. (NYSE: LSI) has beaten archrival Adaptec Inc. (Nasdaq: ADPT) to a $250 million, three-year deal with Dell Computer Corp. (Nasdaq: DELL). And company officials say three more contracts are in staging.

The Dell OEM deal boosted LSI Logic shares $0.34 (1.84%) to $18.79 by late afternoon Monday.

Dell currently uses Adaptec SCSI host bus adaptors (HBAs) but has switched to LSI because that vendor was first to market with Ultra320 SCSI technology -- the newest SCSI interface, which doubles the throughput of current HBAs to 320 megabytes per second. (For more on the seventh generation of the SCSI standard see: SCSI Trade Association.)

Adaptec is not expected to ship Ultra320 SCSI products until the first quarter 2002.

LSI says it's got three more deals in the works with "top tier" server providers, but nothing's been finalized yet.LSI engineers say they had to overcome several technology hurdles to create the Ultra320 SCSI product. Among these hurdles was finding a way to perform packetized data transfers. These kinds of transfers were theoretically possible in the previous generation of SCSI, but no one had worked out an implementation. LSI also developed a way to allocate the HBA more time to transfer data rather than process it.

LSI officials said the company's acquisition of Symbios Inc., a business unit of Hyundai Electronics America, for $760 million in 1998 and its September 2001 acquisition of a unit from American Megatrends for RAID technology, helped LSI to create the Ultra320 SCSI technology.

Storage components represented 32 percent of LSI's $2.74 billion in sales in 2000. CEO Wilfred Corrigan says he expects to see modest sales growth of 1 percent to 5 percent from the third quarter to the fourth quarter 2001.

And he thinks demand is on the rise, despite the recent economic slump. The most severe downturn has been in communications. Storage was much less affected,” he says.

A potential stumbling block down the road for LSI might be its indifference toward iSCSI -- a method that wraps SCSI in IP instead of Fibre Channel before sending it over a network. Despite the market buzz surrounding this area, LSI says it has no activity to support it. "Our focus is on SCSI and FC. We are focused on storage as opposed to network storage," a company spokesperson says. LSI appears to be unaware of the momentous convergence going on between the two sectors.— Jo Maitland, Senior Editor, Byte and Switch
http://www.byteandswitch.com

Want to know more? The big cheeses of the storage networking industry will be discussing this topic in a session at StorageNext, Byte and Switch’s annual conference, being held in New York City, December 11-13, 2001. Check it out at StorageNext2001